USHA ARYA Vs. SPS INTERNATIONAL LTD.

JUDGEMENT

(1.) THE appellants, who are two in numbers, have impugned the order dated 27th May, 1998 passed by the Company Law Board (hereinafter referred to as 'the Board') in proceedings initiated by the respondents 1 to 4 herein under Section 111A of the Companies Act, 1956 (for short 'the Act'). Few facts relevant for the disposal of this appeal may first be noted.

(2.) IN February, 1996, the respondent No. 5 herein, namely, M/s Vijay Remedies Ltd. (hereinafter referred to as the 'company') came out with public issue. There was promoter's quota as well and the respondents 1 to 4 were parties in that quota who were allotted the shares in the promoter's quota of face value of Rs. 10/ - each. In the prospectus, it was clearly provided that there shall be a lock -in period of five year in respect of these shares issued in the promoter's quota and during this period of five years these shareholders shall not transfer their shareholding to any outsider except within the promoters of that particular public issue.

(3.) THIS act of the company led respondents 1 to 4 to file company petition under Section 111A of the Act challenging the aforesaid action of transfer of shares belonging to them in favour of the appellants. Primarily challenge was on the ground that since lock -in period of five years was prescribed, before the expiry of this period the company could not have transferred these shares to anybody else. We may notice here itself that the SEBI had issued Guidelines dated 11th June, 1992 (hereinafter called as '92 guidelines') which, inter alia, provided that during the lock -in period the promoter's quota shall not be reduced/diluted. The respondents 1 to 4 in the said petition relied upon these guidelines and also the provisions contained in the prospectus of the company for aforesaid public issue, issued in February, 1996 providing for lock -in period stipulating that there shall not be any transfer of shares during the said lock -in period. The Board in the impugned order accepted the plea of the respondents 1 to 4 and while ordering rectification in the register by deleting the names of the appellants in respect of aforesaid shares, it also directed the appellants to hand over these share certificates to the respondents 1 to 4.